Archive for the ‘Income Drawdown’ Category

Time for a portfolio health-check. Once a financial plan has been put in place, it is tempting to believe the paperwork can simply be tucked away in a drawer and forgotten. However, like a well-kept garden, a financial plan needs regular tending to ensure it is still on track. ‘Weeds’ can spring up or you may just like to grow something new. What should a financial health-check comprise?

check it is still fit for purpose. The original financial plan will have been matched to an investor’s goals – to retire at 60, say, to fund education for children or whatever. A review will first look at whether these goals have changed, perhaps with the birth of another child, or a change of job or a surprise inheritance. It should consider whether investors need to save more or switch to different types of investments to achieve their goals.

The Portfolio Review

A review will also look at an investor’s progress towards their goals. It may be a portfolio has performed particularly well and it is no longer necessary to take as much risk – or the opposite might be true and an investor needs to take on more risk. A financial health check will also examine whether the underlying investments are performing in line with expectations. Fund managers will have good and bad periods. A run of bad performance may mean their style is out of favour – for example, they may target larger, dividend-paying stocks while the market currently prefers small companies – but your financial adviser will be able to judge whether this is expected or whether it is a sign of a deeper problem. It may be a manager is losing their touch, has left their employer or there are problems within the investment house. In this case, it may be worth switching to another manager.

Investment Changes

A portfolio will also need to be tweaked according to the wider economic environment. The 2008 financial crisis changed the investment landscape – for example, the low interest rates that have followed mean income-seekers have had to work harder to generate the same level of yield. While an event of this magnitude will hopefully not repeat itself in the short term, it highlights the importance of regular reviews and ensuring your financial plan continues to be appropriate. Financial health checks can ensure your garden grows abundantly in all weathers. A little tending can go a long way. To arrange a financial review contact Maxim Wealth Management or call 0141 764 0040.

It has long been accepted that improvements in medicine, lifestyle and an understanding of the effects which habits such as smoking can have on our health means life expectancy is increasing. Future generations will enjoy much longer and healthier lives on average than their predecessors.

Figures released in April 2011 by the Department of Work & Pensions help illustrate rather exactly what this means. These figures suggest, of the under 16s already alive today, over a quarter are going to reach the age of 100 – and already, the average new-born female is going to live to over 90.

As Steve Webb, Minister for Pensions, commented at the time, this means that millions of people will spend over a third of their life in retirement. But, as the DWP were quick to point out, this news also coincides with a period during which pension savings are in serious decline.

A population with increasing life expectancy is putting our welfare system under significant pressure as more people need not only pension income but also healthcare, incapacity support and help within the home. When the time comes for you to retire you can expect that your State Pension will provide little more than a safety cushion. If your retirement plans include holidays, visiting relatives and treating yourself on occasion, then its time to take control of your savings and start building up a retirement fund of your own.

When it comes to retirement planning, time is one of the most important assets you have to save for retirement.

It takes a long time to build up the investments needed to provide a comfortable retirement income and the sooner you start retirement planning and saving, the better. Even putting a small amount away on a regular basis, if done long term, can make a difference. Both occupational or company pension schemes and personal pensions are tax-efficient.

Your contributions to company pension schemes are deducted from pay before tax is calculated and for contributions to personal schemes, tax you have paid before you make your contribution is reclaimed for you by your provider. In to each type of plan you can contribute up to £3,600, 100% of your net relevant earnings or £50,000 (for tax year 2011/12), whichever is the greater and you can then use your personal income tax allowances before calculating the tax you pay when that pension finally pays out.

If you work for more than one employer, a financial adviser can help you check your previous company schemes and work out what you are entitled to. Your retirement planning might also include individual savings accounts (ISAs) which are tax-efficient ‘wrappers’ all profits earned on investments held inside them are paid out to you free of further tax. The amount of money you can invest in an ISA is also subject to limits (£10,680, tax year 2011/12), but it is worth getting into the habit early.

If you think you could benefit from retirement planning we’d be happy to offer our services. But don’t delay because the longer you put off planning for your retirement the less retirement income you’ll have. Call us now on 0141 764 0040 and let’s see if you can help. Contact Us.

To achieve your fair share of pension rights and a clean break you will need expert legal and financial advice, especially where divorce is taking place between older couples and a considerable pension fund built up over the life of the marriage.

The allocation of pension rights on divorce is a particularly sensitive issue mainly because women are likely to have much smaller pension pots than men. This is usually for two main reasons – women on average earn less than men and they are more likely to have spent time out of the workplace raising children. In the event of a divorce, it is as important to consider the fair split of pension provision as it is the division of any other assets. If one spouse has no pension savings because they have stayed off work to support either house or family, while the other has worked and built a substantial fund, this should be taken into account when determining the settlement.

Pension Sharing

When pensions are to be shared, you may not actually split the pension fund itself but instead, offset your rights to it against the value of something else – perhaps some investments, business assets or even the marital home. Where young children are involved, for example, the marital home may be a precious asset which will reduce upheaval in the short term. However, the benefits of this need to be weighted against those more formally related to retirement.

If a longer term solution for pension assets is required, there are a number of available options. The first might be to earmark a portion of your ex-spouse’s pension fund, and defer receipt of that benefit until they retire. However, such earmarking leaves one partner dependent on the other, reducing the chances of a clean break. They may also have to wait years before benefiting – and, if your ex-spouse dies before retirement, it is possible you could end up with no formal pension provision at all.

To protect against such eventualities, it is now possible to split a pension at the time of divorce. A dependent ex-spouse gains access to a specific portion of the main breadwinner’s pension fund which then allows them to move their share away and make a much “cleaner” break. Both parties can then move on and take full control over their own share. In addition, if the main pension holder dies or remarries, all pension rights for the ex-partner remain protected.

The allocation of pensions on divorce requires expert legal and financial advice to achieve a fair split for both parties. If you could benefit from talking to our financial advisers on this matter please call 0141 764 0040 in complete confidence. Contact Us.

The minimum retirement age is now 55 and the statutory age is 65 and this is increasing to 66, for men and women, by 2020.

Retiring later can increase your retirement income

As a general rule, it is better to hold off retirement for as long as possible. Deferring state, employment and/or personal pension benefits generally provides a larger income than retiring early because the older you get, the better annuity rates tend to be. Equally, if you choose to downsize your career but can still earn some income after your chosen retirement date, you may be able to ‘phase’ your retirement, using only a portion of your pension fund to begin with and leaving the remainder invested until later.

However, the most important choice you will make will be over the actual annuity, or unsecured pension product (Income Draw Down), as this will determine your ultimate retirement income. There is also the option of taking 25% as a tax-free lump sum, which could perhaps pay for a long holiday or be re-invested elsewhere to generate additional income. An annuity will provide you with an income stream for life, but this does mean you give up all right to the capital – and your descendants may not inherit anything of your investment if you die soon after retirement. You therefore need to weigh up the merits of guarantees in your annuity choice (thereby securing some of that fund value at least for the short term) against the rate being offered to you, particularly if you smoke or have certain health conditions which could lead to an increase in the amount you receive.

Alternatively, you can use an unsecured pension arrangement, which allows you to keep your fund fully invested and to draw an income directly from that. This income could be less or more than you might receive with an annuity, depending on your circumstances and requirements, but it does mean you preserve some of the value of your pension fund. This approach does, however, come with risks. Rather than consolidating your value as an annuity would, your retirement investment remains in the hands of the market so, whilst the value could go up, it could just as easily go down. Given the time it took to build that value, positioning your portfolio to minimise the risk of losing it is therefore essential.

Finally, you could do a little bit of both – take an annuity for part of your pension fund and leave the remainder invested. Such a combination could offer a decent half way house, but be sure to examine all the options before you make your move.

We’re happy to provide more information about planning for your retirement and you options will really depend on your own set of circumstances and wishes. For professional advice tailored specifically to you why not call our financial advisers on 0141 764 0040.